Morning Bell 31 August

Jessica Amir
August 31, 2020

The Aussie futures are suggesting a 0.7% fall at the open despite U.S. stocks shining on Friday. This really reflects how differently we have been performing to the U.S. market of late, given their market is mainly tech stocks and ours is heavily made up of banks and miners.

The Australian dollar has scaled to its highest level in two-years to US$0.736, with the U.S. dollar continuing to fall. It has continued to drop since the U.S. Federal Reserve said it would let inflation rise to over 2% and keep interest rates at record levels.

What to watch today:

  • The market looks like it will close higher for August, its fifth positive month.
  • Economic data will come back into focus this week with the RBA meeting tomorrow and GDP data out on Wednesday, with Australia to officially enter a recession for the first time in almost 30 years.
  • Bubs Australia (ASX:BUB) reports results today and Zip Co (ASX:Z1P) holds it AGM.

Local trading ideas:

  • Intellectual property business, QANTM Intellectual Property (ASX:QIP) was reiterated as a Bell Potter buy, while the broker decreased QIP’s target price to $1.60, implying 44% share price growth from Friday’s close.
  • Buy now pay later group Spilitit (ASX:SPT) is giving off a bullish trend according to Trading Central’s standard technical analysis principals. Keep in mind SPT is not yet covered by a lot of brokers. However according to Trading Central analysis, SPT shares may rise from $1.83 to $2.35 – $2.45 over the next 50 days.
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Good morning, happy Monday the 31st of August.

I’m Jessica Amir a market analyst with Bell Direct.

Well the Australian dollar has scaled to its highest level in two years, 73.6 U.S. cents as the U.S. dollar has continued to fall, even more so after the central U.S. bank, the Federal Reserve, said it would let inflation rise over 2% and keep interest rates at record levels for some time.

As a result, those comments saw more money continue to flow into U.S. equities and on Friday the U.S. major indices all rose to brand new record highs, of note the top 30 U.S. stocks as measured by the Dow Jones rose above 3,500 points for the first time and that now puts the Dow in positive territory for the year joining the S&P500 and the Nasdaq, which have been in positive territory for some time.

Of note, the S&P500 up the most out of the U.S. indices are 0.7%, with all sectors rising and energy popping the most.

On the commodities front, the gold price rose by about US$30 on Friday, it’s now US$1,974 an ounce, really after the U.S. dollar fell.

Oil meantime has lost about US$0.07  from Friday, it’s now at US$42.97, really as the U.S. hurricanes past the heart of the oil industry without causing widespread damage, meaning companies can now start operations, boosting production and the iron ore price has lifted ever so slightly 0.%.

What to watch or note today, well the Aussie futures are suggesting a fall of 0.7% despite U.S. stocks shining on Friday, but this is really quite reflective of how differently we’ve been performing to the U.S. markets of late, particularly given the majority of their market is made up by U.S. stocks and ours is heavily made up of banks and miners.

However, it looks like the market will close off the month of August higher for the fifth positive month.

And economic data will come back into focus this week, the RBA meets tomorrow and GDP data is out on Wednesday with Australia to officially enter a recession for the first time in almost 30 years.

And reporting season results will trickle through from here on in with the bulk of reporting behind us now.

Today results are out for Bubs Australia (ASX:BUB) and Zip (ASX:Z1P) holds its AGM. What else to consider, well BHP (ASX:BHP) and Rio Tinto (ASX:RIO) listed in the UK and on the New York Stock Exchange all closed higher on Friday, so keep that in mind.

Now for two trading ideas, intellectual property business QUATUM Intellectual Property (ASX:QIP) was reiterated as a Bell Potter buy, the broker decreased QIP’s target to $1.60 but that still implies 44% share price growth from Friday’s close.

Now the reason that QIP’s earnings and revenue were higher was their business is continuing to expand as expected despite COVID-19.

The broker did reiterate it as a buy really as it’s paved out a transformation to e-commerce which will save the business between $4 – $6 million per year and also boost productivity. Bell Potter has modelled for earnings growth to continue for at least the full next year, so that’s QIP a Bell Potter buy.

And secondly the buy now pay later group Splitit (ASX:SPT), is giving off a bullish trend according to Trading Central’s standard technical analysis principles.

Keep in mind Splitit is not covered by a lot of brokers, however just looking at Trading Central’s analysis, SPT shares may rise from $1.83 up to $2.35 – $2.45 over the next 50 days, according to Trading Central.

We have interviewed this CEO of SPT recently who spoke about the businesses integration with credit card providers and how it differs from Afterpay and the like, so you can check out our interview with SPT director on our website.

I’m Jessica Amir with Bell Direct, happy trading, stay safe.

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